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Yes, Warehouses Lose Inventory In Their Own Buildings

Ian Smith

What Is Inventory Shrinkage?

Inventory shrinkage is the loss, theft, miscounting, or damage of goods in the warehouse. If you manage a warehouse, then inventory shrinkage is one of the things that you might be constantly worried about. This article will explore ways to reduce inventory shrinkage.

Is Inventory Lost?

There are a number of ways that inventory can be “lost”. Theft is always a concern, so let’s address that first. Setting up warehouse access controls and limiting access, as well as proper pre-employment screening, are two of the best defenses against theft. Tracking the movement of inventory, along with regular inventory audits, can also alert you to potential shrinkage problems, and limit the opportunities for theft.

But there are also many other non-theft ways that inventory can be lost. One of the most likely ways that inventory is “lost”, is by miscounting the inventory levels. Having a repeatable and accurate counting method is key to identify and understand inventory shrinkage. In a prior article <https://www.getware.com/blog/what-is-warehouse-inventory-counting> we outlined methods to count your warehouse inventory. Once you have an inventory counting methodology in place, and you can reconcile inventory levels with your warehouse management system (WMS), then you can have a system of record that you trust.

What can the inventory data tell you?

Looking for trends in the data will enable you to look for patterns to inventory shrinkage.

  • Are the losses cyclical? 
  • Do you see discrepancies in inventory occurring around specific restocking, replenishment or put-away activity? 
  • Are items being stored in incorrect locations? 
  • Are items being mixed up inappropriately?
  • Are items properly labeled and stored so that they can be easily identified?
  • At what point in the fulfillment process do you de-bulk individual items for shipment?

If you are able to identify a pattern to the lost inventory, you are on the path to resolving process and/or training issues. Along the way, you can also determine if inventory issues are impacting customer satisfaction. Shipping the wrong or a mis-labeled item to a customer destroys both customer goodwill and your profit margin. Customer returns and restocking processes present another opportunity for inventory to be lost. 

  • Are you able to verify that returned items are properly packaged and labeled? 
  • Are items properly inspected and relabeled with identifying barcodes or SKU labels? 
  • Can you verify that they are returned to the proper inventory location?

Lastly, incorrect internal transfers can disrupt inventory planning and customer order fulfillment. Having approval processes in place, together with order planning data, can help you reduce the impact of internal transfers on customer satisfaction.

How to resolve lost inventory

There are a variety of best practices that can help you get a handle on inventory shrinkage. Start by setting realistic inventory thresholds, so that you have enough inventory buffer to prevent outage situations.

Updating your warehouse planogram as new inventory is ingested and items are replenished will help your warehouse associates quickly find SKU storage locations. Performing frequent cycle counts is one of the best methods to stay ahead of inventory issues. When you book/reconcile inventory changes immediately into your WMS, every part of the fulfillment chain is aware of the inventory status.

Conclusion

With the exception of theft, most lost inventory issues can be managed effectively by increasing the frequency and accuracy of inventory counts and reconciling the results immediately with your WMS. Ware Robotics offers autonomous solutions to inventory counting that can operate alongside your existing warehouse fulfillment processes. It’s time to automate your inventory counting and get your lost inventory issues under control.